Federal Reserve's Bowman convenes "unconventional" meeting, sparking speculation on community bank reform path

According to the Zhitong Finance APP, the highest bank regulator of the Federal Reserve has taken the lead, and some executives hope this marks an increase in attention to community banks. Michelle Bowman, the Vice Chair for Supervision of the Federal Reserve and a fifth-generation banker, once had a red baseball cap in her office that read "Make Community Banks Great Again," highlighting her emphasis on community banks. However, since taking office in June 2025, she has not formally announced specific plans for small lending institutions, keeping industry observers highly attentive to her subsequent actions.

On October 9, 2025, Bowman hosted a meeting focused on the current state of the community banking industry, which industry organizations such as the Independent Community Bankers of America viewed as a critical turning point. Surprisingly, in addition to community bank executives, the meeting also invited non-traditional financial figures such as Blackstone Group CEO Stephen Schwarzman and Robinhood Markets CEO Vlad Tenev, leaving many industry insiders puzzled by this unusual combination.

Kelly Brown, CEO of Ampersand Inc., pointed out that community banks are currently facing unprecedented pressure—competing for deposits with fintech companies while also dealing with the challenge of private credit attracting borrowers away from local banks. Treasury Secretary Scott Bessenet emphasized at the meeting that while the expansion of private credit has broadened the depth and breadth of the U.S. financial system, it must not compromise the safety of the regulated system. Bessenet believes that the rise of private credit indicates that the existing regulatory framework is "too stringent."

Reflecting on the 2023 regional banking crisis, community banks had emphasized their essential differences from failed institutions and opposed bearing costs to supplement the government deposit insurance fund. Now, the industry's list of demands includes a call to reassess the leverage ratio framework for community banks—this optional framework aims to replace risk-based capital measures. Bowman previously revealed that as of the first quarter of 2025, there were over 4,000 community banks in the U.S., but only 1,662 chose to join this leverage ratio framework.

In terms of regulatory reform, Brandon Milhorn, chair of the Washington State Banking Regulators Conference, called for a reassessment of the compliance framework for community banks, suggesting adjustments to the asset-based static regulatory thresholds to match economic growth, as these thresholds have not been dynamically adjusted with economic growth. Bowman agreed with this and emphasized that her reform path begins with outreach—by deeply understanding the biggest threats facing community bank operations and the actual impact of regulatory laws, ensuring that the rules do not undermine the banks' ability to operate robustly while adapting to market changes.

While advancing reforms for community banks, proposals to relax regulations on large lending institutions on Wall Street are also underway. The Federal Reserve's proposal released in June aims to repeal key provisions of the "Enhanced Supplementary Leverage Ratio" and comprehensively reform the stress testing system. Bowman also led the drafting of a new capital plan related to the final Basel III agreement, having previously criticized the initial draft that raised capital requirements for large banks by 19%, arguing that it could trigger financial risks, leading the Federal Reserve to withdraw the related draft.

At the October 9 meeting, Bowman reiterated that her regulatory responsibilities cover the full spectrum of institutions from globally systemically important banks to rural single-branch community banks. Meanwhile, Federal Reserve Governor Michael Barr warned on October 8 about plans to lower capital standards for large banks, pointing out that the root cause of the 2008 financial crisis was not community banks, but rather the excessive risk-taking behavior of large complex institutions